This shift, characterised by a robust enforcement campaign against illicit business practices and nominee shareholding, signals a new era for foreign operators – one demanding meticulous adherence to Thai law and a profound understanding of its protective frameworks.
This article, the second in a series titled ‘Thailand’s Shifting Sands: Navigating the Nominee Clampdown and Leasehold Uncertainty for Expats’, delves into the operational realities confronting foreign-owned entities. It examines the nuances of the Foreign Business Act (FBA), the proactive measures taken by authorities to curb circumvention, and the critical pathways to establishing legitimate, sustainable enterprises in this evolving environment.
From the bustling streets of Bangkok to the sun-drenched beaches of Phuket, the message from the Thai government is clear: while foreign direct investment remains welcome, it must align unequivocally with national interests, contributing transparently and equitably to the kingdom’s prosperity. The days of operating ‘under the radar’, it appears, are rapidly drawing to a close, ushering in a period where compliance is not merely an option, but an imperative for all seeking to navigate Thailand’s increasingly regulated commercial waters. This piece will serve as a vital guide for those seeking to understand the tightened regulatory environment and ensure their ventures are built on solid, legal foundations.
FBA Restrictions and Permitted Activities
The Foreign Business Act (FBA) serves to safeguard local companies and ensure Thai control over essential industries, preventing foreign monopolies. It restricts foreigners from owning more than 49.99% of companies involved in regulated industries unless they obtain a Foreign Business License (FBL) or receive promotional privileges from the Board of Investment (BOI).
List 3 of the FBA, which covers “other service businesses”, acts as a broad catch-all provision. This means that many common businesses operated by expatriates, such as restaurants, souvenir shops, e-commerce platforms and various service operations, fall under FBL requirements if they are majority foreign-owned. Most ventures also require a minimum registered capital of B3 million, with higher thresholds applicable to certain industries.
Targeting Illegal Business Practices
The current clampdown extends beyond mere nominee shareholding to encompass specific illegal business operations. A significant focus is on foreign-owned condominiums and pool villas, particularly in Phuket, that are being operated as illegal daily rentals. These effectively function as unlicensed hotels, often hosting fellow nationals, which raises concerns about unfair competition for legitimate, licensed hotels and potential security risks.
Operating a hotel business without a license is illegal under the Hotel Act, B.E. 2547 (2004), and carries significant fines and daily penalties. The government is actively coordinating with local authorities, including the Bangkok Metropolitan Administration and the Land Office, to inspect condominiums for such illicit activities.
The tourism industry is another heavily regulated sector. Foreigners are strictly prohibited from operating tour businesses or working as tour guides, and traditional Thai massage businesses also fall under protective labour laws that prohibit foreign massage therapists.
Authorities are actively investigating and revoking licenses for businesses found in violation of these regulations, with 40 tourism business licenses revoked in 2024 due to illegal changes in board members and shareholding structures. These unregulated operations not only bypass taxation and regulatory oversight but also create unfair competition for legally operated Thai businesses.
The broad nature of the crackdown, targeting both ownership structures and operational illegality, highlights a multi-pronged approach by the government to enforce various laws that foreigners might be circumventing. This underscores the need for expats to ensure that both their ownership structure and their business operations are fully compliant with Thai law.
While some foreigners may resort to nominee structures out of frustration with complex legal requirements, viewing it as a way to bypass a confusing system, the government’s actions are rooted in protecting national interests. The FBA’s stated purpose is to safeguard local companies and prevent foreign monopolisation.
The crackdown is also linked to issues of “minimal tax revenue” and “exploitation of Thai resources”, and even public safety concerns as evidenced by a collapsed building in Bangkok linked to nominee issues.
This suggests a policy that welcomes foreign direct investment that aligns with Thailand’s economic and social evolution goals, distinguishing between desired, compliant investment and undesirable, illicit activities. The challenge for expats is to operate within this legitimate framework.
The government’s proactive efforts, including the development of an “Intelligence Business Analytic System” by the DBD to detect nominee risks within six months, and the establishment of provincial-level task forces instructed to complete investigations of high-risk companies, indicate a long-term commitment to systemic enforcement rather than sporadic raids. This suggests that the era of operating “under the radar” for foreign businesses in restricted sectors is rapidly coming to an end.
Compliant Business Structures
For foreign investors seeking to operate legally in Thailand, several compliant business structures exist:
- Private Limited Company (Thai Majority): This is the most popular business structure, typically requiring a minimum of three shareholders. Foreign investors can generally own up to 49% of the shares. This structure allows the company to operate businesses not on List 1, and potentially List 2 or 3 with an FBL.
- Foreign Business License (FBL): For businesses falling under List 2 or 3 of the FBA, an FBL is required. This can, in certain circumstances, allow for higher foreign ownership, particularly for List 3 activities.
- BOI Promotion: Businesses promoted by the Board of Investment can receive significant incentives, including corporate income tax exemptions for up to eight years, reduced import duties, and, in some cases, special permission for foreign entities to own land and operate with majority foreign ownership. This represents a key legal pathway for larger foreign investments that align with Thailand’s economic development goals.
- Other Structures: Options such as branch offices or representative offices are available for specific, non-income generating activities and can allow 100% foreign ownership, but they come with strict limitations on their business scope.
Simon Causton is a long-time Phuket resident, founder of Citadel Phuket and author of ‘The Phuket Periodical’ newsletter. X (Twitter): @SimonCauston